European mechanical royalty rates are not negotiated individually or set by law as they are set in the United States, where rates for the first recording and release of songs are negotiated between th


European mechanical royalty rates are not negotiated individually or set by law as they are set in the United States, where rates for the first recording and release of songs are negotiated between the songwriters/publishers and the labels, and covers are subject to compulsory rates under copyright law. In Europe, they have been negotiated on an industry-wide basis.

The Neuilly-sur-Seine, France-based Bureau International des Sociétés Gérant les Droits d'Enregistrement et de Reproduction Mécanique (BIEM) is an international organization which represents 44 mechanical rights societies from 52 countries. Members of the societies are songwriters, composers, publishers and authors.

The societies license the right to mechanically reproduce musical, literary and dramatic works. These reproductions include the manufacture of CDs and DVDs, as well as digital downloads from the Internet. The societies also collect the mechanical royalties payable under the licenses.

In addition to other activities, BIEM negotiates a "standard contract" with representatives of the International Federation of the Phonographic Industry (IFPI), setting conditions for the use of the societies' repertoire by record producers (labels). The member societies apply this agreement to the extent that there is no compulsory license or statutory license in their territory. The United States, the United Kingdom and Australia have compulsory license provisions in their copyright law and have various national methods of setting the applicable rates, so the agreement does not apply in these territories.

The BIEM/IFPI standard contract expired on June 30, 2000. Negotiations on the new contract are not finalized; however, societies and labels have been operating under the most recent version of the contract for the most part.

Under this version, the agreed mechanical royalty rate for physical audio products is 11% of the published price to dealers (PPD -- the highest price charged by a label/distributor to a retailer that sells directly to consumers). Two deductions are applied to this rate: 9% for rebates and discounts and 10% for packaging costs. This results in an effective rate of 9.009% of PPD.

Rates for audiovisual products, Internet use and other uses are negotiated on a territory-by-territory basis. The agreement does not cover ringtones.

In some circumstances, a minimum royalty applies. The minimum amount equals 2/3 of the normal royalty rate. The agreement also includes a discounted rate for records re-released more than one year after the original release that are priced at least 35% below the original price. This minimum budget royalty is 57% of the normal minimum royalty.

Complete terms of the standard contract are available on the BIEM Web site.

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